South Africa could pay penalty for unions' Cup action

JOHANNESBURG (Reuters) - One of the greatest fears for the hundreds of thousands of tourists visiting South Africa for the World Cup was the country's high crime rate, but they probably should have been almost as worried about its labor unions.

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Labour groups have threatened to cut the power, freeze transport, abandon security posts and tie up immigration at airports during the World Cup if their demands for better wages and working conditions were not met.

Few analysts expect the groups, led by the largest umbrella organization the Congress of South African Trade Unions, or COSATU, to make good on all their threats or for the government to allow a stoppage in critical work that would bring a grinding halt to the Cup, the first on African soil.

But the unrest coming at a time that is supposed to be a display of national unity has stoked fears among investors about labor actions hurting balance sheets, and served as reminder of the difficulty of doing business in Africa's largest economy because of its costly and inflexible job market.

"It is an embarrassment for the South African government for not being able to fulfil its promises to FIFA to guarantee a strike-free tournament," said Mark Schroeder, a U.S-based senior analyst at Stratfor, a global intelligence company.

"More significantly than that, it is an embarrassment to a government that is striving to make the country more attractive to foreign investment," he said.

CLASHES IN DURBAN

More than a dozen unions affiliated with COSATU have threatened to strike during the Cup, pressing for wage raises well above the inflation rate.

"We refuse to be blackmailed by the employer because of the World Cup 2010 and we shall fight until our demands are met," Mungwena Maluleke, the negotiator representing COSATU unions, has said in a statement.

"COSATU and its member unions are doing what comes naturally and that is using every advantage for the best possible deal for themselves and their members," said Nic Borain, an independent South Africa political analyst.

A strike at logistics group Transnet a few weeks ago illustrated how the World Cup offers workers leverage. The firm caved in and agreed to a higher pay increase to end a 3-week stand-off which disrupted railways and ports.

Stadium security workers and a small group of bus drivers shuttling fans to and from the venues have walked off the job during the tournament.

Police fired teargas and rubber bullets late on Sunday to chase hundreds of protesting stadium stewards out of a Cup venue in the coastal city of Durban.

There was another clash on Tuesday in Durban between riot police and stadium stewards. Police said they were taking over security at Durban, Johannesburg, Cape Town and Port Elizabeth stadiums because of the dispute.

The unions see the Cup as an unprecedented opportunity to press for high wages and are banking that complaints their actions were not patriotic would be overshadowed by their esteemed image of helping bring down apartheid.

But the unions risk a backlash for undermining the Cup party from a middle class in the Rainbow Nation that has grown more racially diverse and among the masses of jobless who see the groups as not doing enough to help reduce what is the highest unemployment rate in a Group of 20 leading global economies.

"COSATU for a long time has not bothered to win the middle ground in its public strikes," Borain said.